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How the ACA's shared responsibility penalties could impact your business

What are the shared responsibility penalties?

There are two potential ways employers can be penalized under the employer shared responsibility provisions of the ACA.


1. Penalty for not offering coverage

Employers with 50 or more full-time and full-time equivalent employees that do not offer minimum essential coverage to at least 95 percent of their full-time employees and their dependents are subject to a potential penalty if one or more full-time employee receives a premium tax credit or cost-sharing subsidy through a public health insurance exchange. The penalty is $2,000 per full-time employee per year, with the first 30 full-time employees excluded from the penalty calculation. Although the penalties are annual, they accrue monthly.


2. Penalty for offering inadequate coverage

Employers that offer their full-time employees minimum essential coverage may be subject to a penalty if one or more full-time employees receive a premium tax credit or cost-sharing reduction through a public exchange. By offering coverage that is "affordable" and meets "minimum value" requirements, an employer may be able to avoid penalties.


Note: Coverage is deemed unaffordable if the individual's required contribution toward the plan premium for the lowest cost self-only coverage is more than 9.5 percent of their annual household income. The IRS has proposed safe harbors for this calculation:  employers may use 9.5 percent of their employees W2 wages, a rate of pay, or the federal poverty line. An employer sponsored plan provides minimum value if the percent of the total allowed costs of benefits provided under the plan is no less than 60 percent.


The penalty is the lesser of $3,000 for each full-time employee receiving the premium tax credit or cost-sharing reduction, or $2,000 for each full-time employee, excluding the first 30 full-time employees. Although the penalty is annual, it will accrue monthly.


Wellmark is here to inform, lead, assist and support you through all the ACA changes. For more information, call your Wellmark representative, broker or agent about Wellmark coverage options that best meet the ongoing needs of you and your employees. Continue to monitor for updates.


Wellmark is not providing any legal advice with regard to compliance with the requirements of the Affordable Care Act (ACA) or the Mental Health Parity Addiction Equity Act (MHPAEA). Regulations and guidance on specific provisions of the ACA and MHPAEA have been and will continue to be provided by the U.S. Department of Health and Human Services (HHS) and/or other agencies. The information provided reflects Wellmark's understanding of the most current information and is subject to change without further notice. Please note that plan benefits, rates, renewal rate adjustments, and rating impact calculations are subject to change and may be revised during a plan's rating period based on guidance and regulations issued by HHS or other agencies. Wellmark makes no representation as to the impact of plan changes on a plan's grandfathered status or interpretation or implementation of any other provisions of ACA. Any questions about Wellmark's approach to the ACA of MHPAEA may be referred to your Wellmark account representative. Wellmark will not determine whether coverage is discriminatory or otherwise in violation of Internal Revenue Code Section 105(h). Wellmark also will not provide any testing for compliance with Internal Revenue Code Section 105(h). Wellmark will not be held liable for any penalties or other losses resulting from any employer offering coverage in violation of section 105(h). Wellmark will not determine whether any change in an Employer Administered Funding Arrangement affects a health plan's grandfathered health plan status under ACA or otherwise complies with ACA.  Wellmark will not be held liable for any penalties or other losses resulting from any Employer Administered Funding Arrangement.  For purposes of this paragraph, an "Employer Administered Funding Arrangement" is an arrangement administered by an employer in which the employer contributes toward the member's share of benefit costs (such as the member's deductible, coinsurance, or copayments) in the absence of which the member would be financially responsible.  An Employer Administered Funding Arrangement does not include the employer's contribution to health insurance premiums or rates.


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